Telcos and their technicolour dreams

With the telco industry beset with disruptive forces is the idea of a telecom company becoming a "multimedia company" really that far-fetched?

It’s difficult to keep track of exactly how many disruptive trends the telco industry is trying to tackle at the moment. There’s the rise of over-the-top providers like WhatsApp and Viber, the continuing decline of profits from text and voice services and the hefty investments needed to cater to the astronomical rise in 3G and 4G data use. All of this, while trying to deal with this idea of offering “multi-channel” customer service options.

And, if this wasn’t enough, telcos are also trying to rekindle their floundering relationship with the Australian public - who, oddly, were recently found to more enamoured with the big four banks than they are with the big three telcos.

All in all, it's an interesting time to be an operator. But despite the adversities at hand some telcos, particularly Optus’ parent company Singtel, are dreaming big.

Speaking at the Amdocs InTouch conference in Singapore last month, the head of Singtel’s Digital Life division Allen Lew outlined his vision of transforming Singtel into a “multimedia company”.

In what seemed like a call-to-arms to a room full of telco execs from around the world, Lew proclaimed that the media sector is “ripe for disruption” and perhaps for once it can be the big telcos doing the disrupting.

To prove his point, Lew presented a system pitched at completely upheaving the way we watch TV: an enhancement to its Mio cable TV service that kills channel surfing and program scheduling by putting all the content it automatically assumes you want to watch into one seamless stream of video that is framed with targeted ads. And in another sci-fi twist, it also uses facial recognition to determine who is using the service at any given time.

The service is set to debut in Singapore by the end of 2014 and Lew’s not alone with his “dream”.

At a glance, the link between service provider and content provider might seem tenuous. But in truth, some of Australia’s telcos have had close ties with the media for quite some time, most notably, Telstra which owns 50 per cent of pay TV operator Foxtel.

However, despite Telstra’s perceived strength in the content space and the efforts of other telcos, industry experts remain sceptical as to whether anything will actually materialise from this industry’s “dream” to be kings of content. Given all the other companies interested in the content space (Apple, Google, Amazon, and as revealed this week, Ericsson to name a few), the odds of this dream becoming a reality seem slim.

Informa analyst Tony Brown was also present at Lew’s speech, and even after his rousing words, he isn't sold on Singtel’s ambitions.

“The only way any of these created any splash [in the media space] so far - for example in Hong Kong with PCCW - is by going into an established industry, like pay TV, buying up some expensive soccer rights... get loads of subscribers on the back of that, and going from there,” he says.

“In terms of creating these new services and applications, you’ve not seen so much proof they can do it,

“A lot of these guys have ambitions to become digital media players, and yes they’ve got the money, but do they have the money that Google and Apple have got to throw at it. Probably not,” he says.

And in terms of what they’re spending money on, Amdocs' revenue management and product services manager, Jonathan Shmukler said telcos are more inclined to pour funds into enhancing their network rather than on securing content.

Shmukler also adds content creators - like ESPN sports - appear to be pulling away from middleman arrangements, and are using the internet to go direct to the public with their work.

So, it’s fair to say that full-blown charge into media mogul-hood will be an uphill battle for most of the telcos. But, for the sake of curiosity, let’s indulge this dream for a minute, and consider the possibilities of this vision.

Firstly, a closer partnership could benefit premium content providers in their ongoing crusade against online piracy. Remember how iiNet, Optus and Telstra walked away from a government-operated roundtable with the forces of Hollywood on internet regulation and online piracy? Well, if content represented a larger part of their business, you can bet they would be willing to reconsider this stance.

For instance, a provider could offer up content on the proviso that the telco actively work to ensure it isn’t pirated across the internet. Operators have more power than producers in preventing this behaviour, but have so far lacked the motivation to act on it.

That’s not good news for fans of BitTorrent and The Pirate Bay - but here’s a possibility that could be a bit more palatable: content could also be used as a reward for sticking it out with a telco. That content could also be unmetered - meaning that downloading it won’t count as part of your monthly data allowance.

This brings us to the next point, content platforms that are part of - or partnered with - the telcos can be offered to consumers as un-metered services, giving them an added incentive to use that system over a competitor. This could be a huge plus, given the rise of mobile video and its pesky tendency to chew through monthly data allowances.

However, it would have to be monitored and regulated tightly by the telcos, as no operator wants to be on the receiving end of a huge bill from offering *unlimited* streaming. Just ask ispONE - it’s not a good look.

And finally, there’s also the point that Amdocs well and truly covered during this year’s InTouch conference: data.

Telcos hold enough - currently underused - data to help content makers ensure that their work reaches the intended audience. Perhaps operators could prove to be invaluable piece of the digital media puzzle surrounding fleeting media profits and targeted advertising.

In Australia, Telstra is in the best position to harness this cross section between telco and media. It already has a thriving media business, housing a vast library of movies, TV shows and music - some of which it offers on an unmetered basis.

In fact, in an analyst briefing in February, Telstra’s chief financial officer Andrew Penn revealed that around the telcos customers had downloaded 2.4 million movies off of its services in the last six months - outlining what he called “wonderful growth” in the video-on-demand market.

It will be interesting to see how Telstra intends manages this convergence between its media and telco businesses - a strategy which it flagged to The Australian in May. Yet, the real danger of this approach lies in the fact that it could bog down its 3G and 4G networks by pushing its users into downloading data-rich content on the move. And it doesn’t matter how good the content is, a user will ditch an operator in a second if it’s providing a slow and congested 3G or 4G network.

Addressing this challenge lies at the heart of the telco-media hybrid model. Telcos will always be viewed by the public as telcos. Some may aim of a move into media - and there are benefits for doing so - but if they forget their core competency in the process, the “dream” could quickly turn into a nightmare.

Harrison Polites traveled to Singapore as a guest of Amdocs. 

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